Newspaper article THE JOURNAL RECORD

Small Business Economic Solution Does Have Limits

Newspaper article THE JOURNAL RECORD

Small Business Economic Solution Does Have Limits

Article excerpt

LOS ANGELES _ The real answer to our money troubles, we're constantly told, isn't fewer company layoffs or a global trade pact or a corporate tax hike. Those things would all help, but the real answer is always small business.

Small business has become the financial aspirin of the '90s _ take two before you go to bed and you'll wake up in the morning with a few dozen jobs created.

President Clinton talks of small business in the way a high school graduation speaker would describe the senior class: They are the future. Former President Reagan said a few years back, "This is the age of the entrepreneur."

Depending on the little guy rather than the IBMs and General Motors has a real down-home appeal, of course, and while there's a lot more to the small-business story, its perceived benefits do carry considerable weight.

There are 20 million small businesses that employ 45 percent of the nation's workforce. New business incorporations jumped from 264,209 in 1970 to 676,565 in 1989, with the vast majority having fewer than 500 workers _ the accepted yardstick to differentiate a small and large business. Small businesses hire at a faster rate than large businesses. And so forth.

The small-business role can be inferred by looking at February's employment data. Of the 365,000 new jobs created, most came from the service, retail and construction industries _ areas that tend to be dominated by smaller companies. Part-time positions, another characteristic of small-business employment, also shot up in February's job report.

So you get the idea. Small business is a very big deal, and given the shifts in job generation, many more of us will be working for these concerns over the next 10 years _ including those who had grown accustomed to a Fortune 500 world of billion-dollar conglomerates, multimillion dollar subsidiaries, and a "cog in the wheel" work mentality.

But before jumping on this brave new world of small business, remember that it's a far different world. These jobs carry liabilities that a Fortune 500 employee might not be prepared for. For instance: Small businesses fail a lot. The number of failures jumped from 11,742 in 1980 to 60,409 in 1990, and the failure rate grew from 36 per 10,000 in 1973 to 98 per 10,000 in 1989. Small businesses usually reflect the overall economy and when times are bad, there's little cushioning. …

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